STRONG prices for thermal coal were unlikely to encourage new mine builds, said Bloomberg News.
“We expect most coal miners exporting into the seaborne market will seek to absorb the current increase in coal prices to bolster balance sheets, rather than commit to new supply,” Viktor Tanevski, a principal analyst at Wood Mackenzie, told the newswire.
“There remains a void of projects that are under construction or construction-ready that can be fast-tracked to alleviate price pressures,” he said.
Instead, coal miners were likely to open the taps on existing capacity idled during last years’ steep contraction in prices. “You won’t find many producers out there who expect we’ll be in a multi-year recovery for coal demand,” said Lucas Pipes, an analyst at B. Riley Securities.
“Coal is facing long-term headwinds.”
Even in China, which produces half the world’s coal, giant state-owned miners are shrinking capital spending budgets, said Bloomberg News citing Michelle Leung, a Bloomberg Intelligence analyst. Older, smaller mines across the country are being shut down, and companies are replacing them with larger assets, keeping production capacity relatively steady, she said.
One outlier was Adani Group. A producer of renewable power, the company is developing the Carmichael mine in Australia. The mine will eventually supply 10 million tons a year, said Bloomberg News.
“We have long been confident that population growth and rising living standards in the Asia-Pacific region will drive ongoing growth in electricity generation capacity, especially in India,” said Adani Australia CEO, Lucas Dow.
“Both coal and renewables will be needed to provide affordable, reliable power while at the same time reducing emissions intensity.”